Supreme Court considers punitive damage decision-making

Psychologists are taking a more comprehensive approach to wellness at work.

By
Jennifer K. Robbennolt, PhD, JD, University of Illinois

Monitor Staff

March 2007, Vol 38, No. 3

Print version: page 52

In October 2006, the U.S. Supreme Court heard arguments in Philip Morris USA v. Williams (No. 05-1256), the latest in a series of cases over the past two decades that have challenged particular punitive damage awards as excessive under the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution.

In BMW v. Gore (1996), the Court held for the first time that a punitive damage award was constitutionally excessive. The Court delineated three guideposts for making this determination: the reprehensibility of the defendant's conduct, the disparity or ratio between the award and the actual or potential harm suffered by the plaintiff, and how the award compares to other penalties for comparable conduct. In the Court's most recent treatment of this issue, State Farm v. Campbell (2003), the Court found that neither conduct that occurred outside the state nor conduct that was dissimilar to the conduct that injured the plaintiff could be used to support an award of punitive damages. In addition, although the Court had previously upheld punitive damage awards of more than 100 times the compensatory damages, the Court (while still not setting a bright-line test) noted that "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process."

In Philip Morris, Mayola Williams brought suit on behalf of her late husband, Jesse Williams, a lifelong smoker who died of lung cancer. The suit alleged that Philip Morris had engaged in "a 40-year publicity campaign to undercut published concerns about the dangers of smoking" despite the industry's awareness that "smoking was dangerous." The jury found Philip Morris liable for negligence and fraud and awarded $821,485.50 in compensatory damages and $79.5 million in punitive damages. The trial court reduced the compensatory damage award to $521,485.50 under the State of Oregon's cap on noneconomic damages and reduced the punitive damage award to $32 million. On appeal, the Oregon Court of Appeals (Williams v. Philip Morris, 2002) reinstated the jury's $79.5 million award. After the U.S. Supreme Court remanded the case for reconsideration in light of that Court's intervening decision in State Farm v. Campbell (2003), the Oregon Court of Appeals again upheld the jury's punitive damage award (Williams v. Philip Morris, 2004) as did the Oregon Supreme Court (Williams v. Philip Morris, 2006).

In its appeals, Philip Morris has argued that the punitive damage award was constitutionally excessive and that the jury was improperly allowed to consider harm allegedly caused to individuals who were not party to the suit (i.e., other Oregon smokers).

The Oregon Supreme Court found that Philip Morris had engaged in "extraordinarily reprehensible" conduct involving "trickery and deceit" and demonstrating "indifference to and reckless disregard for safety" over a period of "decades" that caused physical harm to Williams. The court found that evidence of misconduct harming others within the state was relevant to the assessment of reprehensibility as long as it was similar in nature to that which was alleged to have harmed the plaintiff. In addition, the court found that Philip Morris's conduct could support serious criminal charges under Oregon law, supporting a large punitive damage award under the third Gore factor. In contrast, the court found that the ratio between the compensatory and punitive damage awards (97:1 if using the jury's original compensatory damage award) exceeded the U.S. Supreme Court's preferred single-digit ratio. Balancing these findings, the Oregon court found that the jury's award did not exceed constitutional limits.

The U.S. Supreme Court agreed to hear the case in order to consider how the guideposts that were articulated in BMW interrelate and whether punitive damages may punish a defendant for harms alleged to non-parties.

A number of social scientists, including many psychologists, submitted an Amicus Brief to aid the Court. The brief summarized the research that has been conducted over the past quarter-century to examine the ways in which civil juries make awards of punitive damages and concluded that juries "perform rationally and reasonably" in this area. More specifically, the brief reviews research showing that punitive damage awards by juries tend to be infrequent, modest in size, related to the actual and potential harm caused and to the reprehensibility of the defendant's conduct (based on reasoning similar to that of judges), and limited through judicial supervision and settlement processes. These issues and others raised by the case-such as whether and how jurors or judges consider harm or potential harm to others in determining punitive damages-are ripe to be examined by psychological researchers.

Judicial Notebook is a project of APA's Div. 9 (Society for the Psychological Study of Social Issues).